Most rated insurers in the Gulf Cooperation Council (GCC) have sufficiently robust capital buffers to absorb a potential increase in capital market volatility and any war-related claims, as these are either heavily reinsured or subject to exclusion clauses, according to S&P Global Ratings (S&P) in a report on the credit outlook of GCC insurers in the wake of the military confrontation in the Middle East.
S&P said, “The outlooks on the rated insurers in our portfolio are largely stable, reflecting strong earnings and solid capitalisation. About 85% of the rated insurers had capital adequacy at the highest level in 2025, as per our risk-based model. We anticipate that geopolitical risks will not substantially affect insurers' credit conditions in the short term, unless a prolonged and severe escalation materially affects growth, earnings prospects, and asset values."
Greatest risk
The agency added, “We believe that ongoing volatility in the capital markets poses the greatest risk to GCC insurers' credit conditions. A significant decline in real estate prices and equity markets could erode the capital buffers of companies with thin capital reserves and substantial exposure to these high-risk asset classes. Additionally, in our view, insurers facing solvency deficits may find it more challenging to restore their capital buffers if financing conditions tighten and additional capital becomes limited and more expensive.”
War will weigh on GCC insurers' topline growth
S&P anticipates that the ongoing missile attacks on GCC countries, if prolonged, could significantly weaken consumer sentiment and slow economic growth. This may harm insurers' growth prospects. Already, visitor numbers have declined significantly, and consumers could start postponing purchases of high-value items such as new cars.
That said, S&P could see an increase in demand for insurance policies covering war-related risks, despite a sharp increase in rates. This is particularly true in the UAE, where the insurance sector is exploring a wider insurance scheme for war-related risks. This could boost the topline of a limited number of insurers that write this type of insurance, offsetting a potential decline in other lines of business.
After several years of double-digit revenue growth across most insurance markets in the GCC, S&P now projects a marked slowdown in 2026. It anticipate sthat the insurance sectors in Saudi Arabia and the UAE could see revenue growth of up to 5% in 2026, while growth in other GCC markets could be slower. However, this is contingent on a swift resolution to the ongoing war, as this would help restore consumer confidence and stimulate economic activity.
S&P also said, “Our base-case scenario remains that the military confrontation will be relatively short-lived, with the most intense part lasting around two-to-four weeks, although broader spillovers and intermittent security incidents could extend beyond this period.“